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June 26, 2016 2:04 pm

Intel weighs sale of cyber security business

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Indonesian youth walk past an Intel sign during Digital Imaging expo in Jakarta...Indonesian youth walk past an Intel sign during Digital Imaging expo in Jakarta March 5, 2014. REUTERS/Beawiharta (INDONESIA - Tags: BUSINESS LOGO SOCIETY) - RTR3G2J1©Reuters

Intel is looking at options for Intel Security, including potentially selling the antivirus software maker formerly known as McAfee which it bought for $7.7bn almost six years ago.

The Silicon Valley chipmaker has been talking to bankers about the future of its cyber security unit in a deal that would be one of the largest in the sector, according to people close to the discussions.

Intel declined to comment.

Private equity buyers are increasingly interested in cyber security companies, anticipating strong cash flow as corporate customers become increasingly worried about protecting their business from cyber attacks. A group of PE firms might club together to buy Intel Security if it is sold for the same price or higher than the $7.7bn Intel originally paid for it.

Earlier this month, Bain Capital sold Blue Coat Security to Symantec for almost twice what it paid the cyber defence company last year. Vista Equity Partners also bought Ping Identity, an authentication service, which had been planning an initial public offering at the start of June.

Venture capital flooded into the highly fragmented cyber security industry in 2014 and 2015, as the old stalwarts appeared unable to protect against newer, more sophisticated attacks. Now, as fundraisings slow and in some cases valuations come down, many in the industry expect consolidation as small start-ups are bought for their technology or their sought-after cyber security engineers.

Intel has been restructuring its business after it was hit by the declining PC market, announcing plans this year to cut 12,000 jobs in its largest workforce reduction in a decade. The company is trying to refocus around selling chips for cloud computing rather than PCs, which still contribute 60 per cent of sales and 40 per cent of profits.

The chipmaker bought McAfee in 2010 intending to embed its cyber security functionality on to chips, promising the ability to detect threats at a deeper level. Under this plan, device manufacturers would still have to decide to activate this option.

But almost six years later Intel has not yet completed this plan. David DeWalt, the chief executive who helped engineer the sale, left to lead FireEye, a next generation security company and his replacement, Mike DeCesare, left in 2014 and now runs another security company called ForeScout. Intel Security is led by Chris Young, a former Cisco senior vice-president.

Intel renamed the company Intel Security but maintained the McAfee brand for some of its products.

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